Jakarta (AFP) – Indonesia’s rupiah hit its weakest level ever against the dollar on Thursday, breaching the psychological 18,000 threshold amid concerns about the country’s economy and surging energy costs. The unit hit 18,028 against the greenback despite recent central bank efforts to provide support. The rupiah has tumbled more than seven percent this year and is Asia’s worst-performing currency, according to Bloomberg News, as the US-Israel war on Iran sent global oil prices surging.
Permata Bank chief economist Josua Pardede said an exchange rate of 18,000 was a “psychological threshold” for market investors. The weakening, he told AFP, was fueled by high dollar demand caused by the spike in oil prices and a narrowing trade surplus. Indonesia is a net oil importer and is particularly impacted by the rising crude costs, though the government insists it will leave subsidised fuel prices unchanged.
The country’s trade surplus has been hammered, narrowing to just $89 million in April from $3.3 billion a month before, further reducing dollar supply in the Indonesian market, Josua said. “Dollar supply from goods trade is dwindling, while dollar needs for energy imports, raw materials, dividends, foreign debt payments, and seasonality needs remain significant,” he told AFP on Wednesday. “This is why the increase in the BI (Bank Indonesia) lending rate and intervention is not enough to reverse the rupiah’s depreciation.”
The central bank hiked rates by 0.5 basis points to 5.25 percent last month – the first increase in two years – as it looked to stabilise the rupiah and keep inflation in check. Spokesman Ramdan Denny Prakoso said Wednesday that it continued to use “all available policy instruments” to “maintain adequate foreign exchange liquidity.”
Bank Indonesia also tightened rules for dollar purchases. Since May, buyers of more than $25,000 in a given month must provide supporting documents to justify their need for greenbacks. The limit was previously lowered from $100,000 to $50,000 in April.
© 2024 AFP
